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2022 (12) TMI 1199 - HC - FEMAThis Court jurisdiction to entertain the execution petition of a foreign decree - Summary judgement - execution proceeding emanates from the letter which respondent/DH demanded repayment from the appellant/JD the amount paid to the lender bank as Guarantor of the loan obtained by the appellant/JD; which was refuted by the appellant/JD - HELD THAT - Upon going through decision in Renusagar Power Co. Ltd. Vs. General Electric Co 1993 (10) TMI 232 - SUPREME COURT and applying it to the facts of the present case, we find that no doubt in view of said decision ex post facto permission can be obtained from the RBI to remit the funds, however, when the decree itself is found to be vitiated, being against the prescribed procedure of law recognized in India, the occasion for obtaining ex post facto permission from RBI by the decree holder in respect of awarded amount, does not arise at all. We have already observed that the decree passed by the Court in UK is without any merit and abrogative. Also, in the present case the respondent/DH was the Guarantor to the lender located in a foreign country. We also find that once a conditional permission has been granted by the RBI, any claim beyond the said conditions is contrary to law. A careful evaluation of afore-noted statements made on behalf of appellant/JD s witness as well observations of the UK court shows that the pleas raised by both the sides are on triable issues. However, without granting an opportunity to leave to defend to appellant/JD, the UK court has passed the Summary Judgment, enforcement of which is sought in India. It is an admitted position that on one hand appellant/JD filed its leave to defend and on the other, respondent /DH sought passing of Summary Judgment by the Court. It is also not disputed that at the time of passing of the impugned judgment and decree, leave to defend filed by the appellant/JD was not granted and it is on the basis of documents placed on record the Summary Judgment was passed. In BL Kashyap v. JMS Steels and Power Corporation 2022 (1) TMI 1311 - SUPREME COURT it has been held that while dealing with the application seeking leave to defend, the Court has not to proceed as if denying the leave is the rule and it is only to be granted in meritorious cases, rather the Court has to ensure that where triable issues are raised, leave to defend be granted and even the Court can grant conditional leave to defend. This Court had specifically put a query to appellant/ JD, why it did not file an appeal before the UK Court? - The learned senior counsel appearing on behalf of appellant replied that when the respondent/DH sought a Summary Judgment from the Court at UK to get the decree enforced in India, that too without affording an opportunity to leave to defend to the appellant/JD, which is against the procedure followed under Indian Law, there was no ground to file an appeal against the said judgment in UK or in India. We find that since the foreign decree was not executable in India, in such circumstances there was no occasion for appellant/JD to file an appeal against that and it is only when its executions is sought in India, the appellant/JD has filed its objections. The present case has not been filed under Order und 14 RSC and after passing of Default Judgment, respondent/DH sought Summary Judgment under Rule 24.2 of the UK Civil Procedure Rule, 1998, which is completely different than the other provisions of law and so, the decision in Navin Khilani 2007 (5) TMI 686 - DELHI HIGH COURT is not applicable to the facts of the present case. We find that the setting aside of default judgment and passing of summary judgment by the same court at UK, is not recognized under the prescribed procedure of law in this country. Moreover, the disputes between the parties are triable issues and denial of leave to defend to the appellant/JD is against the interest of justice.
Issues Involved:
1. Validity and enforceability of the foreign decree in India. 2. Jurisdiction of the Delhi High Court to entertain the execution petition. 3. Compliance with RBI conditions and Indian law. 4. Procedural fairness and natural justice in obtaining the foreign decree. 5. Interpretation of balance sheets and financial statements. 6. Applicability of FERA and FEMA regulations. 7. Right to defend and procedural irregularities in the foreign court. Issue-wise Detailed Analysis: 1. Validity and enforceability of the foreign decree in India: The appellant argued that the decree dated 07.02.2006 from the English Court was obtained in violation of Indian law and principles of natural justice. The decree was based on a summary judgment without granting the appellant an opportunity to defend, which is against the prescribed procedure of law in India. The court found that the summary judgment was not on merits and involved triable issues, thus not enforceable in India. 2. Jurisdiction of the Delhi High Court to entertain the execution petition: Initially, the Delhi High Court was deemed not to have jurisdiction under Section 44A of the CPC. However, the Supreme Court later clarified that the High Court of Delhi, exercising its original civil jurisdiction, is competent to entertain the execution petition for a foreign decree. Consequently, the objection regarding the territorial jurisdiction was put to rest. 3. Compliance with RBI conditions and Indian law: The appellant contended that the RBI's conditional permission for the loan agreement stipulated no liability on the Indian company upon invocation of the guarantee. The court noted that the UK Court ignored these conditions while passing the decree. The RBI's conditions were integral to the loan agreement, and any claim beyond these conditions was contrary to Indian law. 4. Procedural fairness and natural justice in obtaining the foreign decree: The appellant argued that the foreign court did not follow due process by setting aside a default judgment and passing a summary judgment without granting leave to defend. The court found that the foreign decree was obtained without adhering to the principles of natural justice, as the appellant was not given an opportunity to cross-examine witnesses or present a defense. 5. Interpretation of balance sheets and financial statements: The appellant highlighted that the balance sheets for the years 2001-2002, signed by the representative of the respondent, showed no liability towards the respondent. The court noted that these balance sheets constituted an admission that no amount was payable by the appellant. The UK Court and the learned Single Judge failed to consider the statutory presumptions under Sections 194/210/211/215 of the Companies Act, 1956. 6. Applicability of FERA and FEMA regulations: The appellant argued that the statutory conditions imposed by the RBI under FERA were binding and not superseded by subsequent FEMA guidelines. The court agreed that the guidelines prevalent at the time of the loan agreement in 1997 should apply, and the RBI's conditions were not overridden by the 2013 circular. The court also noted that the foreign decree was contrary to the provisions of Indian law, specifically FERA. 7. Right to defend and procedural irregularities in the foreign court: The appellant contended that the UK Court did not grant leave to defend and passed a summary judgment based on the respondent's averments. The court found that the denial of leave to defend was against the interest of justice and deprived the appellant of its legitimate right to defend. The summary judgment procedure followed by the UK Court was not recognized under Indian law, and the disputes between the parties involved triable issues. Conclusion: The appeal was allowed, and the judgment dated 29.11.2013 by the learned Single Judge was set aside. The foreign decree was found to be unenforceable in India due to procedural irregularities, non-compliance with RBI conditions, and violation of principles of natural justice.
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